Reddit Shares Tumble Despite 71% Revenue Growth

Reddit's shares dipped after a Q4 earnings report, yet year-to-date gains stand at 20%. The company reported a 71% revenue surge to $427.7 million, multi-faceted user growth, and a potential international upside, making it a compelling option for investors amid current price corrections.

Date: 23-02-2025

AI Rating: 7

Revenue Growth: Reddit exhibited remarkable revenue growth with a 71% year-over-year increase in Q4, reaching $427.7 million. This substantial revenue expansion indicates a strong market presence despite challenges faced from external changes, such as algorithm updates from Google impacting traffic.

Earnings Per Share (EPS): The company reported an EPS of $0.36 for the quarter. This earnings performance demonstrates a positive trajectory, suggesting financial health for Reddit as it continues to grow and adapt to market conditions.

Additionally, adjusted EBITDA soared from $23 million to $154 million, reflecting a strong capacity to generate earnings after accounting for operational expenses.

The growth in user numbers is noteworthy, with an increase of 39% in daily users to 102 million and 42% in weekly users to 379 million. The increase in Average Revenue Per User (ARPU) to $4.21 also signals effective monetization strategies being employed by the company.

Despite Reddit experiencing some setbacks from a Google algorithm change affecting user traffic late in Q4, the recovery in search traffic during Q1 further supports a resilient business model. The anticipated Q1 revenue forecast between $360 million to $370 million signifies a sustained growth trajectory, representing a healthy expected increase of 48% to 52%.

The analysis also highlights Reddit's initiatives in ad tech and AI, which are imperative for improving ad performance and user engagement. The company's international focus is another growth avenue, as it plans to implement translation technologies to cater to a broader audience. These elements present strong indicators for potential stock prices adjustments positively influenced by marketing strategies.

Stocks: RDDT